Why is VBTLX dropping?

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Tenesmus83
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Why is VBTLX dropping?

Post by Tenesmus83 » Thu Nov 07, 2019 6:32 pm

I thought as interest rate drops, NAV of bond funds go up?

SouthernFIRE
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Re: Why is VBTLX dropping?

Post by SouthernFIRE » Thu Nov 07, 2019 6:33 pm

Interest rates jumped up today.

FactualFran
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Re: Why is VBTLX dropping?

Post by FactualFran » Thu Nov 07, 2019 6:55 pm

VBLTX holds long-term bonds. Look at the recent rates of long-term issues in the Daily Treasury Yield Curve Rates web page.

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jhfenton
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Re: Why is VBTLX dropping?

Post by jhfenton » Thu Nov 07, 2019 7:20 pm

Tenesmus83 wrote:
Thu Nov 07, 2019 6:32 pm
I thought as interest rate drops, NAV of bond funds go up?
It has for most of the year. And more recently, the reverse has been true.

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Phineas J. Whoopee
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Re: Why is VBTLX dropping?

Post by Phineas J. Whoopee » Fri Nov 08, 2019 7:01 pm

A mathematically equivalent question is why did bond yields rise this week. I don't pretend to know the answer.

Talk about interest rates is a red herring. Yields of already-issued bonds are determined in an ongoing, continuous auction among investors and financial services companies. No central authority sets them.

PJW

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arcticpineapplecorp.
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Re: Why is VBTLX dropping?

Post by arcticpineapplecorp. » Fri Nov 08, 2019 10:22 pm

nav was $11.01 yesterday. Today it's $11.00 which means interest rates went up (yesterday the 10 year was 1.93% and today 1.94%).

I'd say that was pretty much what you'd expect.

Don't feel bad about the NAV dropping. Now you're getting .01% more in interest going foward (unless interest rates drop, but then your NAV will go up).

VBTLX is up 7.81% YTD. That's nothing to complain about for a bond fund. Of course the total stock market index is up 24.88%.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

RAchip
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Re: Why is VBTLX dropping?

Post by RAchip » Sun Nov 10, 2019 3:29 pm

“Don't feel bad about the NAV dropping. Now you're getting .01% more in interest going foward (unless interest rates drop, but then your NAV will go up).“

You dont get “more interest” because NAV fell. The interest payment amount is the same. The yield (interest amount divided by NAV) goes up because the value of your principal went down.

The interest amounts that bonds pay are fixed. Those amounts do not change. The price of bonds in the secondary market fluctuates.

rkhusky
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Re: Why is VBTLX dropping?

Post by rkhusky » Sun Nov 10, 2019 5:46 pm

RAchip wrote:
Sun Nov 10, 2019 3:29 pm
“Don't feel bad about the NAV dropping. Now you're getting .01% more in interest going foward (unless interest rates drop, but then your NAV will go up).“

You dont get “more interest” because NAV fell. The interest payment amount is the same. The yield (interest amount divided by NAV) goes up because the value of your principal went down.

The interest amounts that bonds pay are fixed. Those amounts do not change. The price of bonds in the secondary market fluctuates.
You will get more interest as the old bonds are replaced by new bonds, such that the increased interest will compensate for the NAV drop over the next 15 years.

And you should be holding VBLAX, not VBTLX. edit: meant VBLTX
Last edited by rkhusky on Tue Nov 12, 2019 8:47 am, edited 1 time in total.

rossington
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Re: Why is VBTLX dropping?

Post by rossington » Tue Nov 12, 2019 3:17 am

rkhusky wrote:
Sun Nov 10, 2019 5:46 pm
And you should be holding VBLAX, not VBTLX.
Or VWETX.
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.

rkhusky
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Re: Why is VBTLX dropping?

Post by rkhusky » Tue Nov 12, 2019 8:08 am

rossington wrote:
Tue Nov 12, 2019 3:17 am
rkhusky wrote:
Sun Nov 10, 2019 5:46 pm
And you should be holding VBLAX, not VBTLX.
Or VWETX.
That's a completely different fund, rather than Admiral versus Investor. edit: Sorry. Meant VBLTX (Long Term Investor) not VBTLX (Total Bond Admiral).
Last edited by rkhusky on Tue Nov 12, 2019 8:49 am, edited 1 time in total.

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jhfenton
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Re: Why is VBTLX dropping?

Post by jhfenton » Tue Nov 12, 2019 8:41 am

rkhusky wrote:
Tue Nov 12, 2019 8:08 am
rossington wrote:
Tue Nov 12, 2019 3:17 am
rkhusky wrote:
Sun Nov 10, 2019 5:46 pm
And you should be holding VBLAX, not VBTLX.
Or VWETX.
That's a completely different fund, rather than Admiral versus Investor.
So is VBLAX, the Vanguard Long-Term Bond Index Fund Admiral Shares.

VBTLX is the Vanguard Total Bond Market Index Fund Admiral Shares.

rkhusky
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Re: Why is VBTLX dropping?

Post by rkhusky » Tue Nov 12, 2019 8:45 am

jhfenton wrote:
Tue Nov 12, 2019 8:41 am
rkhusky wrote:
Tue Nov 12, 2019 8:08 am
rossington wrote:
Tue Nov 12, 2019 3:17 am
rkhusky wrote:
Sun Nov 10, 2019 5:46 pm
And you should be holding VBLAX, not VBTLX.
Or VWETX.
That's a completely different fund, rather than Admiral versus Investor.
So is VBLAX, the Vanguard Long-Term Bond Index Fund Admiral Shares.

VBTLX is the Vanguard Total Bond Market Index Fund Admiral Shares.
Whoops! I read the original post as VBLTX (Vanguard Long-Term Bond Index Investor). And so did FactualFran.

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jhfenton
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Re: Why is VBTLX dropping?

Post by jhfenton » Tue Nov 12, 2019 1:05 pm

rkhusky wrote:
Tue Nov 12, 2019 8:45 am
jhfenton wrote:
Tue Nov 12, 2019 8:41 am
rkhusky wrote:
Tue Nov 12, 2019 8:08 am
rossington wrote:
Tue Nov 12, 2019 3:17 am
rkhusky wrote:
Sun Nov 10, 2019 5:46 pm
And you should be holding VBLAX, not VBTLX.
Or VWETX.
That's a completely different fund, rather than Admiral versus Investor.
So is VBLAX, the Vanguard Long-Term Bond Index Fund Admiral Shares.

VBTLX is the Vanguard Total Bond Market Index Fund Admiral Shares.
Whoops! I read the original post as VBLTX (Vanguard Long-Term Bond Index Investor). And so did FactualFran.
The dangers of ticker talk! :beer I would probably make the opposite mistake if someone did ask about VBLTX.

FactualFran
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Re: Why is VBTLX dropping?

Post by FactualFran » Tue Nov 12, 2019 5:04 pm

rkhusky wrote:
Tue Nov 12, 2019 8:45 am
jhfenton wrote:
Tue Nov 12, 2019 8:41 am
So is VBLAX, the Vanguard Long-Term Bond Index Fund Admiral Shares.

VBTLX is the Vanguard Total Bond Market Index Fund Admiral Shares.
Whoops! I read the original post as VBLTX (Vanguard Long-Term Bond Index Investor). And so did FactualFran.
According to the information at the Vanguard web site, as I write this, VBLAX VBLTX (Vanguard Long-Term Bond Index Fund Admiral Shares) has an average effective maturity of 8.3 years. The link to the yield history of Treasury securities that I posted show that the 7 year and 10 year constant maturity Treasury yields were higher on Nov. 7 (the date of the opening post) than the immediately preceding days. It should not be surprising that the NAV of a bond fund with that average maturity and 49.3% of its assets in Treasury/Agency, would have been dropping leading to Nov. 7.

The near-term preceding low yield for intermediate-term and long-term Treasury securities was on 10/04/19.

Edit: correct ticker symbol of fund.
Last edited by FactualFran on Tue Nov 12, 2019 5:24 pm, edited 1 time in total.

3504PIR
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Re: Why is VBTLX dropping?

Post by 3504PIR » Tue Nov 12, 2019 5:17 pm

arcticpineapplecorp. wrote:
Fri Nov 08, 2019 10:22 pm
nav was $11.01 yesterday. Today it's $11.00 which means interest rates went up (yesterday the 10 year was 1.93% and today 1.94%).

I'd say that was pretty much what you'd expect.

Don't feel bad about the NAV dropping. Now you're getting .01% more in interest going foward (unless interest rates drop, but then your NAV will go up).

VBTLX is up 7.81% YTD. That's nothing to complain about for a bond fund. Of course the total stock market index is up 24.88%.
The NAV reflects the value of bonds in the portfolio, not the “interest” rate or yield to be more precise.

rkhusky
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Re: Why is VBTLX dropping?

Post by rkhusky » Tue Nov 12, 2019 5:18 pm

Deleted. Not relevant anymore.
Last edited by rkhusky on Tue Nov 12, 2019 7:31 pm, edited 1 time in total.

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arcticpineapplecorp.
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Re: Why is VBTLX dropping?

Post by arcticpineapplecorp. » Tue Nov 12, 2019 5:29 pm

3504PIR wrote:
Tue Nov 12, 2019 5:17 pm
arcticpineapplecorp. wrote:
Fri Nov 08, 2019 10:22 pm
nav was $11.01 yesterday. Today it's $11.00 which means interest rates went up (yesterday the 10 year was 1.93% and today 1.94%).

I'd say that was pretty much what you'd expect.

Don't feel bad about the NAV dropping. Now you're getting .01% more in interest going foward (unless interest rates drop, but then your NAV will go up).

VBTLX is up 7.81% YTD. That's nothing to complain about for a bond fund. Of course the total stock market index is up 24.88%.
The NAV reflects the value of bonds in the portfolio, not the “interest” rate or yield to be more precise.
If you read what I wrote, I never equated the two other than to say when the NAV drops (as it did in this example) because interest rates increased, that means you're getting more interest on vbtlx going foward (unless of course interest rates drop back down again. But then your NAV would go back up again too).
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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